Real GDP growth in Russia surpassed expectations in 2018, reaching 2.3 percent, mostly due to one off effects of energy construction. Forecasted growth of 1.2 percent in 2019 and 1.8 percent in 2020 and 2021 reflects a more modest outlook.
... See More + Russia’s macro-fiscal buffers remain strong, with fiscal surpluses across all tiers of government and low public-debt levels. When compared to advanced economies, Russia spends less on health and education. Rebalancing in favor of these categories could improve the overall efficiency of public spending. Short-term inflationary risks have abated, with the Bank of Russia signaling a return to a neutral policy rate. Lending activity is recovering, but the banking sector remains afflicted with high concentration and state dominance. Having eased slightly, the poverty rate remains in double digits with many households close to the poverty line and lacking formal employment. Informal employment is rising in the face of close-to-zero net job creation by medium-sized and large formal enterprises. Key risks to medium-term growth include the expansion of economic sanctions, renewed financial turmoil in EMDEs, a dramatic drop in oil prices, and souring of the global trade environment. The recent double-digit expansion in household credit may also pose a risk to financial stability in the case of a deterioration in the macroeconomic environment.
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Incoming data confirms that global growth lost momentum in 2018, driven by a noticeable deceleration in both advanced economies and emerging market and developing economies (EMDEs).
... See More + The loss of momentum was particularly pronounced in manufacturing amid signs of softening global investment and trade. The global manufacturing PMI suggests continued weakness in January and February 2019, with the index falling to its lowest level since mid-2016. After rising 8 percent in February, crude oil prices continued to increase in March this year: The price of Brent, the international marker, reached $68/bbl by the middle of the month, and WTI, the U.S. benchmark, increased to $58/bbl. In February, the Russian ruble gained 2.2 percent compared to the previous month, supported by the easing of global financing conditions, higher oil prices, and a relatively lower risk perception. Russia’s economic growth was weak in January with output in five basic sectors1 increasing by 0.2 percent, y/y, compared to a 1.9 percent growth, y/y, in December 2018. In February, annual consumer inflation accelerated to 5.2 percent, y/y, up from 5.0 percent, y/y, in January. Monthly inflation growth decelerated across all categories in February, sa, as January experienced the most intense VAT-pass-through effect. Labor market dynamics were stable in January, and real wages continued to grow but only increased by 0.2 percent compared to the same period in 2018. The federal budget balance improved in January compared to the same period last year on the back of stronger non-oil revenues. Credit expansion continued into 2019, but the fast-paced expansion in household credit could pose a risk to financial stability if the macroeconomic environment were to deteriorate. Key credit risk and performance indicators remained largely stable in early 2019.
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Incoming data confirms that global growth lost momentum in 2018, driven by a noticeable deceleration in both advanced economies and emerging market and developing economies (EMDEs).
... See More + The loss of momentum was particularly pronounced in manufacturing amid signs of softening global investment and trade. The global manufacturing PMI suggests continued weakness in January and February 2019, with the index falling to its lowest level since mid-2016. After rising 8 percent in February, crude oil prices continued to increase in March this year: The price of Brent, the international marker, reached dollar 68/bbl by the middle of the month, and WTI, the U.S. benchmark, increased to dollar 58/bbl. In February, the Russian ruble gained 2.2 percent compared to the previous month, supported by the easing of global financing conditions, higher oil prices, and a relatively lower risk perception. Russia’s economic growth was weak in January with output in five basic sectors1 increasing by 0.2 percent, y/y, compared to a 1.9 percent growth, y/y, in December 2018. In February, annual consumer inflation accelerated to 5.2 percent, y/y, up from 5.0 percent, y/y, in January. Monthly inflation growth decelerated across all categories in February, sa, as January experienced the most intense VAT-pass-through effect. Labor market dynamics were stable in January, and real wages continued to grow but only increased by 0.2 percent compared to the same period in 2018. The federal budget balance improved in January compared to the same period last year on the back of stronger non-oil revenues. Credit expansion continued into 2019, but the fast-paced expansion in household credit could pose a risk to financial stability if the macroeconomic environment were to deteriorate. Key credit risk and performance indicators remained largely stable in early 2019.
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The global economy has continued to decelerate, growing by an estimated 2.3 percent in 18Q3 (q/q saar), down substantially from 3.3 percent in the previous quarter.
... See More + This was driven by the slowdown in the Euro Area and Japan. Oil prices rose 4.9 percent (m/m) in January 2019, and they continued to rise, with the price of Brent crude oil reaching 64/bbl US Dollars by mid-February. The ruble nominal exchange rate stayed flat in January compared to the previous month. Russia’s current account surplus shrank in January, compared to the same period last year, on the back of lower oil prices. In 2018, supported by robust global growth, rising oil prices, one-off construction projects and the FIFA World Football Cup, GDP growth in Russia accelerated to 2.3 percent, up from 1.6 percent in 2017 (consensus: 1.7 percent). Labor market dynamics were stable in December 2018. In 2018, the federal budget surplus (on a cash basis) totaled 2.7 percent of GDP compared to a 1.4 percent of GDP deficit in 2017. Key credit risk and performance indicators remained largely stable in November. Reshaping of the banking sector continues due to the ongoing sector clean-up by the Central Bank of Russia and the evolving regulatory landscape.
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The global economy has continued to decelerate, growing by an estimated 2.3 percent in 18Q3 (q/q saar), down substantially from 3.3 percent in the previous quarter.
... See More + This was driven by the slowdown in the Euro Area and Japan. Oil prices rose 4.9 percent (m/m) in January 2019, and they continued to rise, with the price of Brent crude oil reaching 64/bbl US Dollars by mid-February. The ruble nominal exchange rate stayed flat in January compared to the previous month. Russia’s current account surplus shrank in January, compared to the same period last year, on the back of lower oil prices. In 2018, supported by robust global growth, rising oil prices, one-off construction projects and the FIFA World Football Cup, GDP growth in Russia accelerated to 2.3 percent, up from 1.6 percent in 2017 (consensus: 1.7 percent). Labor market dynamics were stable in December 2018. In 2018, the federal budget surplus (on a cash basis) totaled 2.7 percent of GDP compared to a 1.4 percent of GDP deficit in 2017. Key credit risk and performance indicators remained largely stable in November. Reshaping of the banking sector continues due to the ongoing sector clean-up by the Central Bank of Russia and the evolving regulatory landscape.
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In the second half of 2018, despite robust activity in the United States, there was a slowdown in global growth, which reached an almost three-year low of 2.4 percent (q/q saar) in 18Q3.
... See More + The subdued momentum persisted in 18Q4 with the global manufacturing PMI ending the year at a 27-month low. After falling almost 20 percent in November 2018, oil prices declined by an additional 13 percent in December. The drop in prices was driven by ongoing concerns of oversupply as well as weakening prospects for global demand in 2019, particularly in China. While the oil price tumbled in December, the ruble nominal exchange rate depreciated moderately. On the back of turbulence in the emerging markets and elevated geopolitical tensions, net capital outflows in 2018 reached about 4.8 percent of GDP (USD 72.1 billion), the highest reading since 2014. In November 2018, there was a slowdown in growth momentum in Russia, with agricultural production dropping and growth in industry slowing. Labor market dynamics were stable in November. December readings of consumer inflation slightly exceeded expectations (3.8 – 4.2 percent) interval according to the CBR forecast) and the 4 percent inflation target. The federal budget registered a surplus of 3.7 percent of GDP in the first eleven months of 2018.
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In the second half of 2018, despite robust activity in the United States, there was a slowdown in global growth, which reached an almost three-year low of 2.4 percent (q/q saar) in 18Q3.
... See More + The subdued momentum persisted in 18Q4 with the global manufacturing PMI ending the year at a 27-month low. After falling almost 20 percent in November 2018, oil prices declined by an additional 13 percent in December. The drop in prices was driven by ongoing concerns of oversupply as well as weakening prospects for global demand in 2019, particularly in China. While the oil price tumbled in December, the ruble nominal exchange rate depreciated moderately. On the back of turbulence in the emerging markets and elevated geopolitical tensions, net capital outflows in 2018 reached about 4.8 percent of GDP (USD 72.1 billion), the highest reading since 2014. In November 2018, there was a slowdown in growth momentum in Russia, with agricultural production dropping and growth in industry slowing. Labor market dynamics were stable in November. December readings of consumer inflation slightly exceeded expectations (3.8 – 4.2 percent) interval according to the CBR forecast) and the 4 percent inflation target. The federal budget registered a surplus of 3.7 percent of GDP in the first eleven months of 2018.
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Global growth is broadly stable but downside risks from rising trade tensions are increasing.A weakening recovery in trade and manufacturing activities is weighing down global growth.
... See More + Global goods trade has decelerated more rapidly than expected. U.S. tariff s and the retaliatoryresponses of its trading partners have affected 2.5 percent of global goods imports. Surveys ofcompanies in the U.S., China and Japan suggest that the risks of a trade war have not yet fullymaterialized. While the Eurasian Union (excluding Russia) posted strong growth in 2018, Russia'smain trading partners – the Euro area and China – experienced a growth slowdown. Financial conditions for Emerging Markets and Developing Economies (EMDEs) are tightening. Divergent monetary policies and growth prospects among the U.S. and other major economies contributed to a significant appreciation of the U.S. dollar in 2018. This, together with intensifying trade tensions, deteriorating growth prospects and renewed attention to external vulnerabilities has contributed to significant depreciations and capital outflows in many EMDEs. EMDE currencies fell – including the Russian ruble – and cumulative portfolio outflows from EMDEs surpassed those seen after the 2013 taper tantrum. Economies with external vulnerabilities, including Argentina, Indonesia, and Turkey, experienced the sharpest currency depreciations. While the spillover from those countries has been limited, the intensification of turmoil could lead investors to reevaluate their exposure to EMDEs and to capital outflows.
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Russia’s economy contracted 4.6 percent in the second quarter, year-on-year, after a 2.2 percent contraction in the first quarter, but in June the pace of contraction slowed.
... See More + Russia’s second quarter balance of payment remained stable despite a weaker trade balance as the current account improved and capital outflows moderated. Receding oil prices and a further cut in the key policy rates in July brought the ruble exchange rate down to its lowest level since February. Preliminary poverty statistics for the first quarter of 2015 show a significant increase in the number of poor people.
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In June, the European Council extended EU economic sanctions against Russia for another six months while Russia extended its food import ban against Western countries for a year.
... See More + A fluid situation on global financial markets and yet again lower growth prospects led to oil prices losing ground in early July. Ruble depreciation pressure remained throughout June as demand for foreign currency increased while supply declined slightly due to lower oil prices. Russia’s first quarter GDP growth was revised from -1.9 to -2.2 percent−still slightly less than projected earlier−while May high frequency statistics show a deepening recession. On June 25, the government approved the main parameters for the 2016–2018 budgets, foreseeing persistent deficits and evaporating fiscal buffers despite significant expenditure cuts.
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In June, the European Council extended EU economic sanctions against Russia for another six months while Russia extended its food import ban against Western countries for a year.
... See More + A fluid situation on global financial markets and yet again lower growth prospects led to oil prices losing ground in early July. Ruble depreciation pressure remained throughout June as demand for foreign currency increased while supply declined slightly due to lower oil prices. Russia’s first quarter GDP growth was revised from -1.9 to -2.2 percent−still slightly less than projected earlier−while May high frequency statistics show a deepening recession. On June 25, the government approved the main parameters for the 2016–2018 budgets, foreseeing persistent deficits and evaporating fiscal buffers despite significant expenditure cuts.
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Second quarter gross domestic product (GDP) estimates and high-frequency indicators suggest continued weakness in the economy even before the latest round of economic sanctions introduced by the European Union (EU), the United States (U.S.), and other countries in late July.
... See More + The World Bank maintains its current 0.5 percent growth projection for 2014. Inflation slowed in July, but the wide-ranging ban on food imports the Russian authorities introduced in early August will likely increase short-term inflationary pressure and put the Central Banks 2014 inflation target further out of reach. Pressure on the Ruble resumed on the back of escalating geopolitical tension and advanced sanctions. The continued slowdown in Russia comes amid a sharp rebound in economic growth in the U.S. in the second quarter and a modest pickup in activity in China, while external financing conditions for developing countries remain favorable, reflecting continued accommodative policies in high-income economies. Global oil prices reversed their course in July as geopolitical risks emanating out of Iraq abated, but the ban of EU exports of oil drilling technology to Russia can drive up prices again.
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Second quarter gross domestic product (GDP) estimates and high-frequency indicators suggest continued weakness in the economy even before the latest round of economic sanctions introduced by the European Union (EU), the United States (U.S.), and other countries in late July.
... See More + The World Bank maintains its current 0.5 percent growth projection for 2014. Inflation slowed in July, but the wide-ranging ban on food imports the Russian authorities introduced in early August will likely increase short-term inflationary pressure and put the Central Banks 2014 inflation target further out of reach. Pressure on the Ruble resumed on the back of escalating geopolitical tension and advanced sanctions. The continued slowdown in Russia comes amid a sharp rebound in economic growth in the U.S. in the second quarter and a modest pickup in activity in China, while external financing conditions for developing countries remain favorable, reflecting continued accommodative policies in high-income economies. Global oil prices reversed their course in July as geopolitical risks emanating out of Iraq abated, but the ban of EU exports of oil drilling technology to Russia can drive up prices again.
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Financial market volatility has once again increased in response to concerns about the phasing out of Quantitative Easing (QE) in the United States (US).
... See More + However, the initial strong reaction by financial markets was tempered by assurances from the Federal Reserve that it intends to start slowing down the pace of its purchase later this year only if the economy continues to improve and when unemployment rate falls below 7 percent. The European Central Bank also assured markets that rates will remain low for longer. Monetary conditions in high-income countries are projected to remain accommodative and supportive of growth. Global growth is expected to improve, despite softer than anticipated activity in the second quarter. Growth is currently driven by accelerating growth in the US, which is likely to benefit in the second half of the year from a recovering housing market and employment growth. But there are also early indications of improving activity elsewhere: First, the latest Purchasing Manager Indices (PMIs) indicate that the UK services sector expanded at its fastest pace in more than six years. Also Euro Area PMIs achieved a first, albeit faint, rise in activity for 18 months, sustained by the rebound in German business activity, while the downturns in France, Italy and Spain eased in July. Second, industrial production growth has been accelerating and has reached growth rates of 3.8 percent and 5.9 percent in the Euro Area and Japan respectively. In contrast, growth in developing countries has been slowing, even though it remains relatively strong. Q1 growth in developing countries came in at 4.6 percent, down from 5.5 percent in Q4 2012, thereby registering the slowest quarterly growth rate in more than a year. The latest industrial production figures suggest further slowing, with industrial production growth falling to 2.9 percent in May, down from 8.0 percent in January. Also, prospects for a quick recovery look slim, with PMIs in developing countries remaining weak. China’s PMI stood at 51.3 in July, unchanged from June and just marginally above a 20-month low of 51.1 in April. Excluding China, the developing countries’ PMI fell below the critical 50 level for the first time since the end of 2011.
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